Venmo and Bitcoin for Teen?

Dear Ms. Smartphone: My parents set up a Venmo account for me ( a teen) so that I could buy and sell baseball cards more easily. I did that for a while but then Venmo flashed me an opportunity. I found that I was more interested in buying and selling Bitcoin Cash. So, I started buying Bitcoin Cash on their site and that worked for a while and then it didn’t. I lost a significant amount of money. How do I tell my parents about Venmo and Bitcoin? Finn, Boston

Dear Finn: There are three critical pieces of information missing from your inquiry-  first, your age, second how you replenish the Venmo balance , and third the dollar loss. I am guessing you are under 18, that is why your parents set up the Venmo account for you. Is the dollar amount- say more than $300?  But, don’t beat yourself up. From time immemorial, people have waged, gained, and lost on horses, stocks, slot machines, sports and lotteries. Here is my previous take on online investments.

Parents, who are not familiar with Venmo, should note that this platform began offering active users the ability to buy and sell cryptocurrency in April. The initial investment, which can be as low as $1.00, will rise and fall in value, just like a stock. There is a service fee, and you can’t transfer “coins” to another user, but you cash out the balance to a designated bank account. 

The Apology

You have to level with your parents, but they may know what’s going on since they set up the initial account, possibly with email notifications. Here’s some advice to get you going. First, explain to them that you have this entrepreneurial streak- that’s why you started trading baseball cards. You view crypto as the next big thing and want to dip your toes in the water…. If you say this you will be in sync with some of the big brokerage firms and analysts.

Also hint that you are interested in digital currencies because you see it as a generational sea change. Cyroptocurrency is the currency of your generation, the currency of the future.  Blockchain, the record keeping behind Bitcoin Cash will be embraced, then regulated by national treasuries. This might be a stretch, but weren’t you doing homework for a history assignment on El Salvador now that it has adopted bitcoin as its national currency?

Hopefully your parents will chalk your financial losses to growing up. It may be their trust that you have most forfeited. Be prepared to repay them the starting balance on your Venmo account. You can earn this money back on weekends or after school.  And, hopefully, fingers crossed, they will see a bright spot  should they need to offset some short term gains with a short term loss; they could be getting a statement from the IRS if you sold the cryptocurrency. 

Crash, Burn, Recover

What you are describing may happen frequently now that kids have phones and access to brokerage accounts. From the nineteen fifties onward kids crashed their parent’s cars- in the 2020s, kids also crash and burn on the Internet.  So, move on and don’t lose your curiosity and passion. However, I do want to close by mentioning the difference between using digital currency versus paper money. 

Our Federal Reserve banks have been tracking for some time that purchases with credit cards and electronic payments are overtaking cash. However, there is a concomitant trend to spend more and save less. Academic studies find that those using credit cards are less likely to remember how much they spent, take less time deciding what to buy, are more willing to pay high prices and make a greater number of purchases. Some brain research finds that cashless spending activates the same reward centers of the brain that are triggered by cocaine and other addictive drugs!

Could cryptocurrencies, like your Venmo investment, be particularly addicting and dangerous? Physical money is tangible, so when we hand it over to pay for something, we also give up something.  But, cryptocurrencies like Bitcoin Cash lack intrinsic economic value (they are not tied to any asset) and are “frictionless” to buy and sell. Perhaps we all need to reflect on that as we grow up with them.